‘Only 36% of adults have access to formal banking’

The Executive Director, Citiserve Limited, a subsidiary of VIGEO Holdings, Mrs Lola Ogunbambi, whose company was licensed by the Central Bank of Nigeria (CBN) as a Payment Terminal Service Provider (PTSP), in this interview with Ayodele Aminu, speaks on the cash-less Lagos and Nigeria’s payment system. Excerpts:

As a provider of banking and payment services, what are your challenges?

The process started slowly but is steadily getting better. The initial challenges were with the merchants, acceptance of the channel as the new payment mode. The man machine barrier was strong and is still in some areas, but generally, it’s getting to be accepted. As a service provider, our job is to train the cahiers on how to use the Point of Sales (PoS) and assure them of the ease of use. The efforts put in by the Central Bank of Nigeria (CBN) and the bank’s Chief Executive Officers (CEOs) in terms of media adverts also gave a great deal of credibility to the process.

The CBN’s cash-less policy is expected to engender financial inclusion. How is CitiServe taking advantage of this initiative?

The general idea is to include up to 70 per cent of adults in the financial system. With the 36 per cent financial inclusion, we are far from getting to this goal. Bank account holders are the same set of people using Internet payments and Automated Teller Machines (ATMs) to date. The CitiServe model from 2007 has been in the retail sector with The Orange Box being used for offline transactions by network partners, who trade in Global System for Mobile (GSM) communication credit. We had sponsors from state governments and NGOs and the time is right now to cash in on this database and include them in promoting inclusion. Some of them are petty traders that can easily be transformed into mobile money agents; this is the angle we are including in our plans with some banks.

How many PoS services have CitiServe sold and what are or is the Unique Selling Preposition (USP)?

CitiServe has sold over 15,000 units to date. We are at several buying stages with some banks and some state governments. We also want to leverage on the data base we created in our retail distribution model. Our value proposition goes beyond the installation of PoS at merchant locations and training them on usage, it is to also provide options of products and applications that will improve and increase the daily transaction of the merchant.

Our Orange Box (CMPOS) is easy to use; we are glad to say several top executives including CEOs of some banks have had the opportunity to use it and confirm this to us.

Our CMPOS is rugged, we had the opportunity to do a drop test, i.e dropping it on the floor and putting it together again without any data loses, breakage or damage. We have a full technical team certified to break the seal and repair the PoS in case of any malfunction or careless damage. I say careless because we have had some of our partners use other chargers to power the Orange box and burn some elements. The Orange box is combustion certified, which means it can be used at petrol stations. With about 19 years working on the PoS, we have had adequate time to understand and train on the repairs of the PoS locally. The battery life is 72 hours as well and we have also applications for Wifi, CDMA, GPRS and LAN. The basket of options is full.

What are the challenges facing the cash-less policy and how can it be overcome?

The first challenge is that the banks are gearing to have the PoS at the merchant locations faster and racing for the high number. This means we have had to increase the teams involved in the process. It is a full logistic operation and the tolerance level is nil.

Some of the challenges include delayed credit to merchants, Fear of security, Man-Machine barrier and network failure. Security concern by customers remains one major stumbling block facing the cashless policy, customer aversion stems from the legitimate fear of financial loss due to fraud. Technological advancement has facilitated a myriad of ways in which network systems can be intercepted unlawfully. To combat the fear of fraud and reduce loss, systems security should be a priority with robust authentication standards and encryption technology deployed to protect information during transmission. Additionally, e-signatures and advance electronic certification using Public Key Infrastructure (PKI) could be, in the medium term, adopted to provide an added layer of security.

What is the solution to delayed credit to merchants after customers have made payments?

Not all transactions are delayed, the plus one plan with the credits is a strong issue that the Nigeria Interbank Settlement System (NIBSS) is working on the speed of reconciliation along with the banks such that 100 per cent is achieved.

Why can’t merchants get value same day?

Some get value same day, it’s the same as the issue explained. The national central switch is working on improving this with the local switches.

One of the biggest challenges facing e-payment is security of customers’ funds. How can that fear be addressed?

The most critical issue is for the customers to ensure the security of their PIN, assess codes and logon information. The security does not apply mainly to PoS, but on the web ATMs and Internet banking. Losing or sharing your personal information is a gateway to fraud. It is a battle worldwide. When using the PoS, customers should cover the pad when entering their Personal Identification Number (PIN), remove their card and collect the receipt and leave no information behind.

One major reason the CBN moved from the swipe card to the chip is because you have to enter a security PIN to have access to your bank account. It is an added security. Be careful to do this on the PoS always.

To combat security issues. It is imperative that with e-payment, system security is priority; robust authentication standards and encryption technology are used to protect information during transmission. Additionally, e-signature and advance electronic certification could be adopted to provide an added layer of security.

Do you see the need for a legislation that will make it easier for operators, banks and regulators to import needed cash-less banking equipment with minimised restrictions / fees at the ports?

An exception on duty will be good. This is the ultimate as it will reduce the overall cost and subsequently reduce delays at ports.

The issue of PoS transaction fee now at 1.25 per cent for merchants has not been addressed. Don’t you think some merchants with low turnover may discourage the use of PoS because of additional fees?

The 1.25 per cent was a focal point of debate for the CBN. The percentage charge is indeed a substitute to the cost of using cash in the economy. The cost of moving cash from the merchant location to the bank, counting and managing the cash is huge, (bullion van, security men, insurance, risk) this is usually not passed on to the merchant. If this were the case, I believe 1.25 per cent might be a lower option for many businesses.

Using a card for payments is also good for the merchant as this elicits a rapid expansion of retail products, better management of operational cost and ease of reconciliation.

The cash-less policy will, ultimately,bring more of the unbanked into the system as well.

There are charges for convenience and inconvenience in most already: banks charge for over the counter cash below a certain figure and charge a fee on ATMs if used by other bank cards etc.

There are, however, unique cases where the charge should be subsidised, removed or transferred, such as fuel. Also, the international organisation for vending machines operators confirmed that there is a waiver for vending sales.

What mechanisms must be put in place to ensure that true conditions of each PoS and their locations are tracked at all times by the regulators or NIBSS as obtained in other countries?

The NIBSS has a central server that sees all PoS activity and location. They monitor and trace the activities but it is not their responsibility to track conditions of the PoS. That is the job of the service provider.

What do you think was responsible for why the CBN made adjustments to the initial cash-less policy already partially implemented in Lagos?

The adjustment was to allow stakeholders’ wish to prevail. The PoS acceptance by merchants should be enhanced with more communication in the media. Individuals and corporate account holders that use cash a lot will adjust. I know several small scale businesses were rushing to open accounts for their staff salaries which needs time for reference etc. The delay is not denial, but a time to put things in perspective for the stakeholders. I am sure with the new timeline, the CBN governor will not listen to any excuses.

What other problems must be addressed to improve public confidence on e-payments and increase patronage?

Communication is the critical issue that needs focus. Public education on the values need to be stressed.

So, can you enlighten us about other things CitiServe does?

Our business is to provide alternative channels of convenience for the distribution of services and products. Our vending machines are at several locations conveniently offering drinks and snacks to customers at offices, schools and hospitals.

We provide empowerment opportunities for state beneficiaries. Over the years, our Orange box has given indigenes income options through commission on GSM PIN credit, Pay TV, PHCN etc and we continue to expand our basket of offers. Added to those are training programmes for beneficiaries who represent states and can provide several services in terms of revenue collection, identification and verification programmes and other community services. The orange box is also biometric enabled for data mining for government data base. We work with some banks on developing fast track applications to enhance services and a smooth process at branches along with applications to integrate the telecommunication companies with their dealers. All these are in alignment with the financial inclusion of the CBN and the cash-less Lagos policy.